Each artwork purchased by an eligible business to a value of less than $30,000 (ex-GST) may be eligible for a complete tax deduction, subject to four criteria:
- The artwork must be tangible; and
- Capable of being moved; and
- Purchased with the dominant purpose of display in a business premise; and
- Not be trading stock.
There is no bar to whether the artwork is bought as a resale or whether the parties involved in the transaction are related to each other. There is no limit to the number of artworks costing less than $30,000 (ex-GST) that an eligible business may claim a tax deduction for.
It is possible to transfer ownership of an artwork from a super fund to its members by obtaining a market valuation for that purpose. If the trustee or member is an eligible business they will also obtain a tax deduction equal to the cost of the artwork being transferred.
For the 2019 financial year, there are three periods of instant asset write-off thresholds:
- 1 July 2018 to 28 January 2019 – less than $20,000
- 29 January 2019 to the day of 2 April 2019 – less than $25,000
- The night of 2 April 2019 to 30 June 2019 – less than $30,000
The write-off has been extended to medium sized businesses, categorised as those with an annual turnover of $10 million or more but less than $50 million. These businesses will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from the night of 2 April to 30 June 2020.
The instant asset write-off threshold may be employed on multiple depreciating assets.
Artworks are classified as investments under the SIS Act but also as depreciating assets under Division 40 of the Income Tax Assessment Act 1997. Normally artworks, particularly expensive ones, are subject to a very low rate of depreciation due to their useful life being determined as 100 years by the Australian Taxation Office.
Where artworks are transferred from super funds to their members, the ATO has released a valuation instruction form where valuations are required for taxation purposes. It is important that any valuation prepared to transfer artworks from a super fund to its trustee or members follow the methodology set out in the instruction form.
Cold Shoulder, 2018
Woven tapestry and textile collage, wool, cotton, linen & silk
65 cm by 67 cm